St. Louis recently landed on Money’s list of the 25 Best Cities for Flipping a House —noting an average return on investment of 65.8% and a year-over-year change in home prices of 4.2%. What’s driving this demand?
Whether you’re considering a flip in St. Louis or just want to know more about the housing market in the Gateway to the West … here are some interesting facts:
#1. A variety of factors driving pent-up demand.
“Real estate agents point to a variety of factors driving pent-up demand that isn’t matched by what’s offered in the market: Interest rates remain low, lending has loosened a bit, and the financial situations of many households have improved since the recession, enticing more buyers into the market,” reports the St. Louis Post-Dispatch.
In a separate article, the news outlet also notes that strong job growth and consistently lower unemployment rates in the area have increased the market’s attractiveness.
#2. Supply is low and demand is high, creating an ultra-competitive market in St. Louis.
While St. Louis ranks as one of America’s more affordable metros, low supply and high demand are causing a spike in overall home prices.
According to the St. Louis Post-Dispatch, “homes that have barely been on the market are receiving multiple bids above asking price. Would-be buyers are struggling to compete with others willing to pay cash, waive certain contingencies or buy sight-unseen.” With bidding wars looming around every new listing, St. Louis flippers are seeing great opportunity if they can provide move-in-ready housing in a market where returns are high.
#3. High rental returns show an encouraging trend.
A recent study by HomeUnion suggests that the 63043 zip code (Maryland Heights; St. Louis) is among one of the top in the country for rental rate returns —with an annualized total return of 5.5%. They look at supply-and-demand factors in each market, as well as vacancies and rent appreciation, permitting activities, job growth and school rankings. For investors, the opportunity to earn rental returns in this range is quite enticing.
#4. Trade, transport and utilities lead regional job growth.
Missouri (as of June 2017) has the 20th lowest unemployment rate at 3.9% and, while the national unemployment rate hovers around 4.3%, St. Louis comes in under both at 3.8%. Led by trade, transport and utilities, the job market is encouraging demand in the housing market.
What’s more, there is a thriving start-up incubator environment in the St. Louis MSA according to Kevin Kliesen, an economist at the Federal Reserve Bank of St. Louis.
“The vibrant start-up environment here bodes well for the St. Louis economy over the longer term,” said Kliesen, who noted that the sector has recently grown faster than start-up hubs in Austin and Silicon Valley, and features start-up incubators like T-REX and Cortex, which have the potential to support stronger future economic growth.
Investing in St. Louis
Thinking about investing in St. Louis real estate? Explore the opportunities available to both borrowers and real estate investors in St. Louis and across the country by connecting with the team at Patch of Land today!